MAPI Global Outlook: December 2012

Friday, December 7, 2012

MAPI’s global report for December 2012 analyzes the recent economic performance of key regions and offers a forecast of world growth, the dollar, and U.S. export and import growth. As the protracted saga of world economic troubles that began in 2007 persists, there is growing concern that a wide range of regional economic vulnerabilities could morph into a global risk, which might be difficult to control with policy ammunition so low in many key countries. U.S. economic sluggishness, a renewed recession in the unstable Eurozone, and sharp slowdowns in the growth rates of major developing economies have created a risk-averse world business climate, with negative implications for capital investment activity in the developed and developing blocs. As noted in the May 2012 report, weakness and instability will be facts of life in the global economy for some time to come.

In one sense, the current world situation is less worrisome than that of 2008 and 2009. It appears that the renewed weakness in many advanced economies will not be as dire as was the case in those difficult years. But in another respect, the current situation is more disconcerting given the sharp slowdown in the emerging market economies, whose quick recoveries acted as a global counterbalance to rich-world weakness in the years following the 2009 downturn. The central question for the outlook is whether the world is facing yet another stretch of extended adjustment to the aftermath of the 2008-2009 recession or a renewed crisis that will require significant action by governments and central banks.

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